it is tiresome to share viewpoints with you
Learning can be very tiresome for those who are not interested in learning.
You 8% interest rate for 1970 is significantly too high; it was more like 5-6%.
According to historical mortgage data from the Fed (the table I downloaded only goes back to 1972 -- check for yourself at federalreserve.gov, the annualized conventional mortgage rate for a 30-year loan in 1972 was 7.38%, and that for 1973 was 8.04%. If it was your first home -- and depending on where you got the loan (FHA rates are higher), the amount of down payment, the size of the loan (jumbo loans have higher rates), your credit history, and whether or not you paid points -- the lending institution would have charged a higher base rate and you would have had to pay a monthly mortgage insurance of a fraction of a point on top of the base rate. That would put your mortgage near or above 8% in 1972, and definitely over 8% in 1973. I also obtained Prime Rate (PR) data from the Fed going back to 1956. Here are some dates and data surrounding 1970:
1969 7.96%
1970 7.91%
1971 5.73%
1972 5.25%
1973 8.03%
1974 10.81%
It will be a cold day in hell when you can get a mortgage at anywhere near prime rate. Your suggestion of a 5-6% mortgage rate in 1970 is ludicrous -- the PR in 1970 was 7.91%. You must be thinking of 6-month rates on Certificates of Deposit -- successful banks aim to make 2% over their costs. The annualized Overnight Federal Funds Rate was 7.17% in 1970, for Pete's sake. Do you really think the banks and mortgage houses would give you a conventional mortgage for less than the Fed Funds rate? Those that might have done that would have gone out of business long ago. They would probably do it as a sucker rate to get people into a variable-rate loan; then after the sucker period they would bump it up a couple of percent.
It is ridiculous to pick a small region of the country to prove a point regarding home values. We are talking about general principals here, principals that apply to a whole country. I could just as easily pick a region of the country, even where population is high, and find far less growth in home values than that in the Bay Area.
If you grew up in a country with 20+% inflation, then I think you grew up in a third-world country (or, at most, a "developing" country). I doubt the quality of your education there, but I don't doubt the quality of your experience (which would be best put to use by becoming a musician and playing the blues).
Here is a quote from a recent news letter I received from a registered investment advisor, John Mauldin:
There are any number of headwinds to the economy, as Shilling and others (including your humble analyst) have noted. Among these:
1. High energy prices serve as a tax
2. Central banks everywhere tightening
3. A slowing housing market
Sooner or later, I think they will take their toll.
But that's only another man's opinion, and I'm sure there are plenty of other men who refuse to equate energy prices with a tax. The point still remains: like taxes, higher energy prices at the producer are very difficult to pass onto the consumer because the consumer pays the higher prices also and, therefore, has less disposable income. The end result is that corporate profits go down, consumer disposable income goes down; and these effects are a drag on the stock market and the economy in the same way as across-the-board tax increases would drag down the economy. |
